HYDROPOWER IMPACTS OF THE BAY-DELTA PLAN WATER QUALITY OBJECTIVES ON THE STATE WATER PROJECT: An Overview of Issues and Impact Study Methodology Prepared for State Water Resource Control Board Phase II Comprehensive Review Workshops October 26, 2012 Submitted by the State Water Contractors Public Comment Bay Delta Plan Workshop 3 Deadline: 10/26/12 by 12:00 noon 10-26-12
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HYDROPOWER IMPACTS OF THE
BAY-DELTA PLAN WATER QUALITY OBJECTIVES
ON THE STATE WATER PROJECT:
An Overview of Issues and Impact Study Methodology
Prepared for State Water Resource Control Board
Phase II Comprehensive Review Workshops
October 26, 2012
Submitted by the State Water Contractors
Public CommentBay Delta Plan Workshop 3
Deadline: 10/26/12 by 12:00 noon
10-26-12
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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1. ISSUE
The State Water Board must ensure that its update of the Bay Delta Plan is not at cross purposes with AB32, the Global Warming Solutions Act of 2006, and SB 2(1x), 2011. These landmark legislations set California on a course to lead the rest of the country and world to avoid the most dangerous consequences of global warming. California is the world’s 12th largest source of carbon dioxide, the chief heat-trapping gas that causes global warming. These laws mandate that the state must reduce its share of emissions that contribute to global warming. California's goal of supplying 33 percent of its electric energy needs from renewable energy sources by 2020 is a major building block in achieving AB 32 greenhouse gas reduction targets. Carbon free hydroelectric generation along with the role hydroelectric power must play in integrating renewable generation are vital to the State of California being able to meet the objectives of AB32. Changes in flow patterns created by Water Quality Objectives adopted by the State Water Board could have the unintended consequence of reducing the flexible hydropower production that the state is relying on to achieve its carbon reduction goals. We are prepared to assist the State Water Board to evaluate the effect any proposed Water Quality Objectives would have on the state’s carbon reduction goals. 2. BACKGROUND
2.1 California Industry and Energy Policy In Transition
The California Energy Policy is to reduce greenhouse gas emissions, create jobs and contain costs. State energy and environmental agencies are joining with the California Independent System Operator Corporation (CAISO) to achieve these objectives. The new policy requires new investments in transmission, energy efficiency, smart grid applications, and increased use of renewable resources. Easing the transition are the California Air Resources Board, California Public Utilities Commission, California Energy Commission and California Environmental Protection Agency. Though the policy is set forth in law and regulations, the industry remains in transition. One reason is the pace of change. The other is the magnitude of the change as the flowchart below shows.
1960 to 1998
• Vertically Integrated Utilities
• Bilateral Arrangements for Power and Transmission
• SCE and PG&E responsible to keep lights on
1998 to 2006
• AB 1890 Passed
• Create CAISO and CalPX Markets (central or organized markets)
• Seams issues with adjacent utility systems
2006 to Now
• AB 32 (2006) – 20% GHG Reduction
• SB 1X2 (2011) – 33% Renewable
• S/D of Once-Thru Cooling Plants
• Cap-and-Trade
• Water Quality Objectives
• WECC Reliability Standards
Operation +
Competition + Integration
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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For decades the California electric industry and infrastructure was based on vertically integrated utilities that owned generation, transmitted the power over their high voltage transmission lines and distributed the power to their customers. Restructuring legislation passed in 1996. It applied to investor owned utilities and allowed public owned utilities to opt in. The legislation was intended to create a competitive electric energy market in California. Fundamental to the change was a breakup of the vertically integrated utilities. The legislation created (1) the California Independent System Operator (CAISO) to operate the transmission grid and generally ensure system reliability and (2) the California Power Exchange (CALPX) as a central marketplace to conduct energy auctions that established energy prices and schedules on both a day-ahead and an hour-ahead basis. The restructured California electric industry began operation on April 1, 1998. Under the new market structure California experienced the 2000-2001 energy crisis during which energy prices soared and blackouts cut power to millions of customers in California. By the time state and federal regulators stepped in, considerable damage had occurred. The Pacific Gas and Electric Company was forced to declare bankruptcy, the California Power Exchange was forced out of business, families and businesses in San Diego were hammered by dysfunctional market prices and the state found itself spending an estimated $40 billion on power on behalf of the IOUs. In 2006, the Legislature passed and Governor Schwarzenegger signed AB 32, the Global Warming Solutions Act of 2006. The law requires that California reduce greenhouse gas emissions (GHG) to 1990 levels by the year 2020, and ultimately achieve an 80% reduction from 1990 levels by 2050. In passing the legislation, the Legislature found and declared:
“Global warming poses a serious threat to the economic well-being, public health, natural resources, and the environment of California. The potential adverse impacts of global warming include the exacerbation of air quality problems, a reduction in the quality and supply of water to the state from the Sierra snowpack, a rise in sea levels resulting in the displacement of thousands of coastal businesses and residences, damage to marine ecosystems and the natural environment, and an increase in the incidences of infectious diseases, asthma, and other human health-related problems. “
and “Global warming will have detrimental effects on some of California’s largest industries, including agriculture, wine, tourism, skiing, recreational and commercial fishing, and forestry. It will also increase the strain on electricity supplies necessary to meet the demand for summer air-conditioning in the hottest parts of the state.”
A consequence of the legislation is the utility industry is required to integrate significant amounts of renewable power and participate in the California Cap-and-Trade program while continuing the recovery from the energy crisis. AB 32 requires California electric utilities to supply 20% of their customer needs with renewable power by 2020. In 2011 Governor Brown signed SB 2(1x) (Simitian) into law. This bill revises the Renewable Energy Resources Program to require an increase in the amount of electricity generated from eligible renewable energy resources per year, to at least 33% of total retail sales of electricity in California per year by December 31, 2020.
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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2.1.1 Reduce Greenhouse Gas Emissions
The California carbon reduction requirement is to achieve 1990 level of emissions by 2020. AB 32
designates the California Air Resources Board as responsible for monitoring and regulating GHG
emissions in order to achieve reduction obligations. After extensive stakeholder input, the CARB
adopted the Cap-and-Trade regulations on in October 2011. In the process of adopting the regulations
the CARB conducted an extensive CEQA review including the finding that Cap-and-Trade is the least cost
alternative to fulfilling its AB32 obligations. The regulations went into effect on January 1, 2012.
A cap and trade system is a means by which reductions in greenhouse gas (GHG) emissions can be
implemented. It involves creating a market where GHG emission allowances can be bought and sold by
entities. Setting a cap for GHG emissions is fundamental to the to the program’s function. The California
cap and trade system sets targets for emissions which are gradually reduced each year.
The ARB has regulated the electricity sector in the initial stage of the program. The cap for electric
sector emissions is 97.7 million metric tons (MMt). Each year beginning in 2013 through 2020, the
electric sector emission cap must be reduced by approximately 2%.1
2.1.2 Renewable Energy Serving California businesses and families with renewable power is the other relevant component to California’s carbon reduction policy. Over a period of nearly a decade, the California legislature has progressively increased the amount of renewable power that utilities must use to serve their customers. Those amounts were initially established in 2002 under Senate Bill 1078, accelerated in 2006 under Senate Bill 107/Assembly Bill 32 and expanded in 2011 under Senate Bill 2(1X). The result is California's Renewables Portfolio Standard (RPS) is one of the most ambitious renewable energy standards in the country. The RPS program requires investor-owned utilities, electric service providers, and community choice aggregators to increase procurement from eligible renewable energy resources to 33% of total procurement by 2020.2 SB 2 (1X) institutes three compliance periods that require the utilities use increasing amounts of renewable power to supply customers. The California Public Utilities Commission (CPUC) is responsible to establish the quantity of electricity products from eligible resources to be procured by each retail seller for each compliance period. The first compliance period requires procurement from eligible renewable resources that averages 20% of retail sales over the period between January 1, 2011 and December 31, 2013. After 2013, quantities must reflect reasonable progress in each of the intervening years sufficient to ensure eligible renewable resource procurement achieves 25% of retail sales by December 31, 2016; 33% of retail sales by December 31, 2020; and not less than 33% thereafter. Variable energy resources, primarily wind and solar are seen as the resources most likely to fulfill the RPS requirements. There are two key characteristics of wind and solar that present challenges in integrating their output into California's existing generation fleet; specifically, high forecast errors and
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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the inherent variability of energy production by these resources. Figure 1 illustrates the variation in total wind output in the CAISO service area during April, 2006. The variation is continuous and occurs from second to second, minute to minute and hour to hour. The CAISO has observed that "The integration of variable energy resources will require increased operational flexibility—notably capability to provide load-following and regulation in wider operating ranges and at ramp rates that are faster and of longer sustained duration than are currently experienced.3" Unlike water systems where the pressure sometimes drops due to demand outpacing supply, the power system must continuously balance generation supply to load demand. If load and generation are not balanced automatic schemes kick in to shed load in order to prevent equipment damage that could lead to major system wide blackouts.
Figure 1
2.2 Water Quality Objectives
The State Water Board is considering changes to the 2006 Water Quality Control Plan for the Bay-Delta. The State Water Board has set a series of workshops to consider information that has been developed since it completed the review of the 2006 Bay-Delta Plan and since it released the 2010 Flow Criteria Report. The changes to the Water Quality Control Plan may include flow criteria that shifts releases of water from the Lake Oroville reservoir and limit the amount of water exported from the by the SWP. As described below, the SWP hydropower production is a function of water releases from Lake Oroville and water delivered south of the Tehachapi Mountains. A flow criteria that shifts power production from the summer months into the spring and fall could have a broad array of impacts on SWP power production and consumption as well as the impacts on the California power grid.
3 CAISO, Integration of Renewable Resources, Operational Requirements and Generation Fleet Capability at 20%
RPS, August 31, 2010, page iii
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2.3 The State Water Project
The State Water Project is the largest State-built, multipurpose water project in the United States. A primary purpose of the Project is to store and deliver water to its customers, the State Water Project Contractors. The service areas of the SWP Contractors are found throughout Northern California, the San Francisco Bay area, the San Joaquin Valley, the Central Coast and Southern California. The scope of the State Water Project is evident in Figure 2. The SWP's system contains 1,750 MW of hydropower capacity with the capability to produce and average annual generation of 4,300 GWh of energy when operating under the existing Biological Opinions (the 2008 Fish and Wildlife Service Biological Opinions for Coordinated Operations and the 2009 National Marine Fisheries Service Biological Opinion for OCAP). The SWP provides about 12.5 percent of the hydropower capacity in California. Annually the SWP pumps consume 7,750 GWh of energy on average when the SWP is operated to meet the requirements of the existing Biological Opinions. The remaining energy not supplied by the SWP hydropower is obtained from a number of sources, including contracted purchases of hydroelectric and renewable energy, the SWP's ownership portion of the Lodi Energy Center power plant, and mid-term and short-term purchases from California's power market. 2.3.1 Built in Operational Flexibility
Flexibility for managing pumping needs and power generation was built in as the Project was constructed. The Project designers recognized the advantages of pumping mainly during off-peak hours and generating mainly during on-peak hours. Excess pumping capability was installed in many of the pumping plants, generation plants were sized to increase peaking capacity and storage was incorporated at strategic locations, solely to increase operational flexibility. In the electric utility business, the ability to control the pattern of generation is called “shaping.” The shaping of both load and generation is a feature unique to the Project. As an additional reliability measure, an extra unit was installed in many of the pumping plants so that standard maintenance outages would not reduce a plant’s pumping capability. Today, the SWP continues to take advantage of the Project’s built-in operational flexibility by minimizing pumping and maximizing project generation during on-peak hours when energy costs are highest. Ideally, the maximum Project pumping is scheduled during the off-peak hours. Conversely, maximum Project generation is scheduled during the peak hours. While the Project moves as much water as possible during the off-peak hours, delivery levels, storage availability and regulatory restrictions often create a need to pump water outside of the off-peak hours. This operating scheme helps support the California grid operations by supplying spare energy to the grid during on-peak hours and providing a valuable sink for off-peak generation.
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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Figure 2
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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2.3.2 SWP Energy Sources
Figure 3 provides a simplified depiction of the energy sources that could be used to supply the SWP pumping loads in 2020. The graphic illustrates the energy sources required to serve the average annual pumping load without the complication of capturing the SWP's practice of supporting the California grid operations by generating surplus energy in the on-peak and scheduling the maximum amount of pumping in the off-peak. The SWP relies on market purchases to supply much of its off-peak pumping needs. The graphic shows only the simple energy balance required for the SWP to supply just its pumping needs. In recent years, the SWP sells into the market have ranged between 1,000 GWh and 2,000 GWh per year. The additional on-peak sale and off-peak purchases are not captured in the graph.
Figure 3 2.3.3 SWP Generation and Pump Load Shaping
Especially during the high-load summer months, the California market has produced two pricing segments for the traditional 16-hour on-peak period; an 8-hour super-peak and an 8-hour partial-peak. Prices are generally significantly higher in the super-peak. When not all of the pumping can be accomplished in the off-peak, it is first shaped into the partial-peak and then into the super-peak. Occasionally, some pumping is required in the super-peak. The SWP energy limited hydroelectric generation is shaped to maximize output during the super-peak, with any additional generation scheduled first into the partial-peak and finally into the off-peak. Some of the Project features that allow the shaping of pumping loads and generation are apparent while others are more subtle. Storage was incorporated in the Project at locations where it provided operational advantages. An example is the Oroville power facilities. Additional storage was added to the Thermalito Afterbay in order to increase the peaking operation of the Hyatt and Thermalito power plants. The Thermalito Afterbay allows water released from Lake Oroville during peak hours to be stored and released back into the Feather River at a steady rate.
SWP Hydro56%
Pine Flat5%
Lodi Energy Center6%
Renewables8%
Market Purchases and Exchanges
25%
SWP Resources 20207,750 GWh Pumping Load
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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San Luis Reservoir, O’Neill Forebay and Silverwood Lake provide major facilities for regulation of water en route through the main aqueduct. However, it is the nearly simultaneous operation of the hydraulically interdependent pumping plants, coupled with the extra pumping capability built into the plants, that allows heavy off-peak pumping. These unique design considerations minimized the need for off-stream storage in the original project design, while still allowing the Project to shape the water pumping as if additional storage was available. DWR continues to construct cost-effective Project additions that reduce energy costs. The recently completed Tehachapi Afterbay provides increased flexibility for using off-peak pumping at the Edmonston Pumping Plant. 2.3.4 SWP Ancillary Services
The Project features that allow shaping of pumping loads and generation also allow the Project to effectively participate in California’s ancillary services market. The ancillary services market ensures that capacity is on hand to adjust the flow of electricity when the unexpected happens, such as power plant failure or a sharp rise in the demand for power. Four types of operating reserves are included in the ancillary services market: Regulation – Generation that is already up and running and can be increased or decreased almost instantly to keep energy supply and energy use in balance. Spinning Reserves – Generation that is running at less than full output, with additional capacity that can be increased within minutes. Non-Spinning Reserves – Generation that is not running, but can be brought up to speed within ten minutes. Pump-drop that can be reduced within ten minutes can also supply non-spinning reserve. Replacement Reserves – Generation that can begin contributing to the grid within an hour. At times there is an economic advantage for the Project to participate in the ancillary services market over simply producing energy. The Project’s generation can be used to supply all four operating reserve categories. However, because of the ability of both the SWP hydroelectric generators and pumps to meet the 10-minute response requirement, the SWP does not participate in the Replacement Reserve market designed for slower responding generation. Hydroelectric generation is especially suited for providing regulation because of its ability to quickly change energy output. The Project often uses pump-drop to participate in the non-spinning reserve market. 2.3.5 Special Protection System provided by State Water Project
Owners of transmission that are connected to the CAISO controlled grid are obligated to comply with
reliability standards as set forth by the Western Electricity Coordinating Council (WECC). A System
Protection System is an automatic protection system designed to detect abnormal system conditions
and take corrective actions. Such an action may include changes in demand or generation.
These standards have directly led to the SWP delivering a unique and valuable service to a large
transmission owner and consequently the statewide power grid. The protection system was agreed to
by DWR and the transmission owner in lieu of constructing reinforcements between two major
substations in California.
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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This protection system was triggered in September 2010 and June 2012. During each event the SWP
curtailed about 1,000 MW of generation and pump load in order to maintain the reliability of the power
grid. [This is equivalent to being able to turn off power to 1/3 of Sacramento.] There are few, if any,
comparable sources of such special protection connected to the California power grid.
3. CHALLENGES OF ACHIEVING CALIFORNIA ENERGY POLICIES - COSTS, SYSTEM RELIABILITY AND
CARBON REDUCTION
Achieving the state energy policy objectives will be a tall order. Steve Berberich, president of Cal-ISO,
acknowledged the need for thousands of megawatts of flexible generation in California as more
renewables come on line. At the same CAISO symposium, the president of the CPUC, Michael Peevey,
stated that as renewable-energy penetration grows we “especially need coordination and collaboration
among various state agencies.”4 The CAISO and the CPUC have each opened proceedings to meet the
challenges. Their focus is maintaining the reliability of the power grid while keeping costs down. The
CAISO anticipates an increased need for load following and regulation ancillary services as additional
renewable generation in integrated into the existing generation fleet. Its initial findings disclose that the
existing generation fleet may not be sufficient to provide the flexible generation that the intermittent
renewable generation requires.
3.1 Reliability of the Power Grid
The ISO’s studies show that reliably operating the grid with a 33 percent Renewable Portfolio Standard
(RPS), the potential retirement of 12,079 megawatts of once-through-cooled generation units, and the
potential addition of 12,000 megawatts of distributed resources requires California to maintain a fleet of
sufficient flexible and local capacity resources both now and into the future. The need for flexible
capacity resources increases with the level of intermittent resources typically used to meet the state’s
renewable portfolio requirements.
Since 2007 the CAISO has held workshops, conducted studies and published studies that report on the
challenges of integrating renewable resources into the grid. For example, CAISO completed a study in
2010 on the operational requirements for integrating renewable resources (Integration of Renewable
Resources, Operational Requirements and Generation Fleet Capability at 20% RPS, August 31, 2010). It
followed-up in October 2011 reporting that its studies “reveal that the integration of intermittent
renewable resources will require resources that can flexibly and accurately respond to dispatch signals
and can quickly ramp to new operating levels.” The CAISO has developed a roadmap of the scope and
timing of activities that will lead to the re-tooling the transmission grid and making extensive
modifications to its power markets. Of interest to the State Water Board is that the CAISO finds
deficiencies in flexible generation that is necessary for the integration of intermittent renewable
4 Keith Casey, “Briefing on Renewable Integration – Market Vision and Roadmap,” Briefing prepared for CAISO
Board, October 20, 2011.
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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generation. Water Quality Objectives that impacts on flexible SWP hydropower production will require
additional flexible generation be developed.
3.1.1 A Changing Net Load Shape
A reason for the concern is the dramatic change in the shape of the power demand that the CAISO must
ensure is met. Historically the shape of the power demand appeared as shown in Figure 4. On a typical
day the demand followed a fairly predictable shape. The figure shows how the customer demand varies
throughout the day. In this case it shows a demand of about 30,000 MW at midnight. The demand
continues to drop slightly until around 5:00 am when the day begins. That is followed by a steady rise
until around 5:00 pm when businesses go through the daily cycle. The demand continues its steady
decline as the day comes to an end.
Figure 4 One of the primary CAISO responsibilities is to continuously, and almost instantaneously, balance generation to load. One of the issues the CAISO faces is the change in load following requirements as California moves to meeting the 33 percent RPS. Before the heavy penetration of variable output renewables, the intra-hour and inter-hourly variation in load was due solely to variations on the demand side. Flexible output "load following" generation was used to keep generation and load in balance. With the heavy penetration of variable output resources, the CAISO will have to supply load following to dampen both the variation in load and the variation in the output from variable output resources. This
Hydropower Impacts of the Bay-Delta Plan Water Quality Objectives on the State Water Project: An Overview of Issues and Impact Study Methodology
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change will increase the need for flexible output resources, such as conventional hydropower generation. Figure 5 illustrates the change in load following requirements that are expected when renewables are incorporated into the generation portfolio. Figure 5 shows the highly variable load shape that will be served by flexible output generation in the future. Flexible output resources will see a load pattern in Figure 5.that is net of energy generation from variable output resources. This net load demand curve (shown in Figure 5) illustrates a significant increase in the load following burden that will be the responsibility of the flexible output resources. The Cal-ISO has stated that by 2020, with the amount of renewables coming on line, the grid could see ramps approaching 13,500 MW in two hours. The increased load following requirement could necessitate the development of new flexible output resources.
Figure 5
Integrating a 33 percent RPS, maintaining local reliability, and meeting other state energy policy goals
such as the once-through-cooling mandate creates several operational challenges for the ISO. Among
these challenges is ensuring that the ISO has sufficient flexible capacity to address the added variability
and unpredictability created by variable energy resources. This challenge is magnified even further with
the prospect of losing over 12,000 MW of flexible capacity resources to once-through-cooling mandates
established by the State Water Resources Control Board.5
5 same
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3.1.2 Depressed Energy Market Prices
Another situation that the CAISO has identified is that production of significant amounts of renewable energy will depress energy market prices and undermine the commercial viability of needed flexible generation. This has led to the CAISO seeking unprecedented authority from FERC to contract with owners of flexible generation in order to assure grid reliability. Concerned that natural gas power plants with the ability to integrate renewables could retire in coming years for lack of sufficient revenue, Cal-ISO approved a backstop payment mechanism. Under a new risk-of-retirement provision, CISO will now offer payments to plants that are at risk of retirement and that CISO sees as necessary for system flexibility or local reliability within a two- to five-year time frame. This new market mechanism was partly spurred by controversy over the 578 MW Sutter Energy Center, a natural gas plant that was on the verge of retiring—and never returning, according to plant owner Calpine—until the CPUC directed investor-owned-utilities to negotiate a resource-adequacy contract with the plant. CISO said Sutter was needed in 2017 to integrate renewables.6 The CAISO studies also point out that over-generation conditions during the spring months will likely increase as solar and wind resources are added to meet the increased RPS requirements. Over-generation simply means that there is more power being produced than customers are consuming. Such a situation typically occurs during the spring when demands are low and hydropower production is high. The addition of significant amounts of renewable generation will increase the frequency of CAISO managing a potential over-generation condition. A delta flow regime that requires more reservoir releases during the spring will compound the problem. 3.2 Cost of Implementing Energy Policies
The CPUC is the principal agency responsible for implementing the RPS program. It has several
proceedings underway which are in total or part intended to address challenges the RPS presents. On
May 5, 2011, the Commission adopted the Order Instituting Rulemaking (R.) 11-05-005 to open a new
proceeding for the implementation and administration of the 33% RPS Program. Currently, the
California Public Utilities Commission (CPUC) is considering modifications to its Resource Adequacy (RA)
program to incorporate flexible capacity procurement requirements and the ISO is conducting local
reliability studies as part of the CPUC’s 2012 LTPP proceeding.7
The CPUC developed this report in order to provide new, in-depth analysis on the cost, risk, and timing of meeting a 33% RPS. As identified in the report, the cost to achieve the RPS will be significant. It estimates the major new transmission lines that are needed alone will cost more than $15 billion. It also confirms that the cost of the energy supply will be higher under the RPS.
6 Chris Raphael, “Need for Flexible Power, Cooperation Heard at Cal-ISO Symposium,” California Energy Markets,